gannett announces second quarter 2020 results · 2020. 8. 6. · gannett announces second quarter...

Gannett Announces Second Quarter 2020 Results

Implemented $160 million in annualized synergies year to date

Ended the quarter with $159 million of cash and cash equivalents

Digital-only subscribers grew 31% from the prior year to 927,000

MCLEAN, VA — August 6, 2020 — Gannett Co., Inc. ("Gannett", "we", "us", "our", or "the Company") (NYSE: GCI) today

reported its financial results for the second quarter ended June 30, 2020. Prior to November 19, 2019, our corporate name was

New Media Investment Group Inc. ("New Media" or "Legacy New Media"), and Gannett Co., Inc. ("Legacy Gannett") was a

separate publicly traded company. On November 19, 2019, New Media acquired Legacy Gannett (the "Acquisition"). In

connection with the Acquisition, Legacy Gannett became a wholly owned subsidiary of New Media, and New Media changed its

name to Gannett Co., Inc.

“While the second quarter was significantly impacted by the COVID-19 pandemic, our revenue was in line with the guidance we

shared on our last earnings call and our EBITDA performance benefited from our expense reduction efforts," said Michael Reed,

Gannett Chairman and Chief Executive Officer. "We saw sequential improvement to revenue each month during the quarter and

successfully realized over $125 million of incremental expense savings during the quarter. In addition, we continued to execute

on our operating and integration plans from the Acquisition, with over $160 million of cumulative annualized synergies

implemented by the end of the quarter. Combining our incremental expense savings, our synergy implementation, and the normal

course expense savings that rolled forward from the first quarter, our operating expenses included in Adjusted EBITDA were

down 26%."

"At no time in our history has the value of high-quality journalism been as clear as it is right now at this intersection of a global

pandemic and a nation in turmoil over systemic racism and inequality. Our journalists have worked tirelessly and doggedly to

help keep our communities safe and informed, while exercising the crucial role of holding officials accountable. As digital, social

platforms are overtaken by the spread of misinformation, our readers trust us to clear through the noise with credible, fact-based,

fair reporting. And that is evidenced by audiences turning to us in record numbers since the beginning of the pandemic and very

strong digital subscription growth. Our employees have been phenomenal, performing during these challenging times at the

highest level, which is a testament to their commitment to our mission and our communities. We do not have certainty around

how the pandemic will continue to affect our country and the economy, but we remain highly confident in our ability to continue

to execute upon our operational and integration plans."

Financial Highlights

in thousands Second quarter 2020

GAAP operating revenue $ 767,000

GAAP net loss attributable to Gannett (436,893 )

Adjusted EBITDA(1) (non-GAAP) 78,018

Net cash flow used for operating activities (GAAP basis) (35,849 )

Free cash flow(1) (non-GAAP) (44,223 ) (1) Refer to “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA and Free Cash Flow, and reconciliations to the most

comparable GAAP measures.

Second Quarter 2020 Consolidated Results

• Second quarter revenues of $767.0 million rose 89.7% as compared to the prior year, reflecting the Acquisition.

◦ Same store pro forma revenues (as defined and reconciled below) decreased 28.0%, due to unfavorable impacts

resulting from the COVID-19 pandemic and general trends adversely impacting the publishing industry.

• Digital advertising and marketing services revenues were $168.8 million in the second quarter, or 22.0% of total

revenues.

• Over $160 million in annualized synergy measures were implemented by the end of the second quarter, with

approximately $41.2 million in savings recognized in the quarter.

• On a pro forma basis, operating expenses included in Adjusted EBITDA were down 26.3% to the prior year quarter

due to the implementations of synergies, incremental cost measures in response to the COVID-19 pandemic, and

normal course expense savings that rolled forward from the first quarter.

• Non-cash goodwill and intangible impairment of $393.4 million was recognized in the second quarter of 2020 in

connection with the Company’s annual impairment testing. The non-cash charge was driven by the COVID-19

pandemic and the uncertainty the crisis has created.

• GAAP net loss attributable to Gannett of $436.9 million in the second quarter reflects $393.4 million of non-cash

goodwill and intangible impairment and $66.3 million of depreciation and amortization.

• Adjusted EBITDA totaled $78.0 million. Margins in the quarter were 10.2%, despite the pressures from the COVID-19

pandemic.

Balance Sheet & Cash Flow

• As of the end of the second quarter, the Company had cash and cash equivalents of $158.6 million.

• During the quarter, the Company repaid $6.3 million in principal under its credit facility.

• Sold $7.5 million of real estate in the second quarter and used the net proceeds to pay down debt.

◦ Over $15.0 million in real estate sales under contract expected to close during the third quarter; and on track

to sell an additional $100 - $125 million of real estate by the end of 2021, which we expect will enable us to

accelerate debt repayment.

• Capital expenditures were $8.4 million, primarily for product development, technology investments, and maintenance

projects. We expect capital expenditures to be between $9 - $10 million in both the third and fourth quarters.

• Cash flow used by operations in the second quarter of 2020 was $35.8 million compared to cash flow provided of $25.9

million for the prior year quarter primarily driven by interest paid and integration costs related to the Gannett acquisition.

COVID-19 Response

• Strengthened balance sheet and continue to preserve liquidity:

◦ Reduced expenses for the second quarter by over $125 million through implementation of furloughs,

significant pay reductions, reductions in force, and cancellation of non-essential travel and spending.

▪ Expect to maintain expenses, other than variable costs of goods sold, in line with the second quarter

for the remainder of 2020.

◦ Reduced planned capital expenditures for 2020 by approximately 20%.

◦ Suspended quarterly dividend until conditions improve.

◦ Implemented NOL Rights Plan to protect approximately $435 million in tax assets.

◦ Deferred over $50 million of payments, under the CARES Act, using provisions relating to ERISA pension

contribution deferral and employer FICA tax deferral.

◦ Restructured required additional pension contributions, that were originally due in 2020 and 2021, into

quarterly installments beginning in the fourth quarter of this year through the third quarter of 2022.

• Adapted our workplaces and continue to promote the health and safety of our employees:

◦ Transitioned 95% of our non-production and delivery employees to work from home by late March.

▪ Thoughtfully exploring how to prepare our offices as safe work environments for those employees

who wish to return.

◦ Implemented social distancing measures and hygiene best practices in line with CDC and WHO guidelines

for all facilities and employees in product and delivery roles.

◦ Maintained consistent operations across all properties, with no significant disruptions.

• Supported our communities by providing high quality journalism and by creating innovative solutions to support small

businesses:

◦ Created new tailored content for readers and their communities, which has received more than 885 million

views since mid-February, nearly all of which is available for free:

▪ Nation’s Health daily COVID-19 specific section runs in USA TODAY in print and digital and is

available in all local e-editions; real-time updates online.

▪ The USA TODAY and 35 local markets publish coronavirus newsletters for our readers.

◦ Support Local platform has had over 1.6 million page views which provided communities with an easy way

to discover opportunities to help their favorite local businesses.

▪ Free business listings providing special services, such as enabling gift cards and delivery services.

Publishing Segment

• Publishing segment revenues totaled $695.9 million in the second quarter.

• Circulation revenues totaled $342.6 million in the second quarter.

◦ Same store pro forma circulation revenues decreased 13.6% in the second quarter, partially stemming from a

reduction in volume of our single copy and home delivery sales, reflecting the impact of COVID-19 pandemic

on businesses that sell single copies of our publications as well as general industry trends.

• Print advertising revenues totaled $187.9 million in the second quarter.

◦ Same store pro forma print advertising revenues decreased 45.0% compared to the prior year reflecting the

negative impact from the COVID-19 pandemic.

• Digital advertising and marketing services revenues were $104.4 million in the second quarter.

◦ Same store pro forma digital advertising and marketing services revenues decreased 26.7% versus the prior

year period, reflecting the impacts from the COVID-19 pandemic beginning in the latter part of the first quarter

which negatively affected digital revenues across each category.

• Commercial printing and other revenues contributed $61.0 million in the second quarter.

• Paid digital-only subscribers now total approximately 927,000, up 31.3% year-over-year on a pro forma basis.

• Publishing segment Adjusted EBITDA was $92.0 million, representing a margin of 13.2% for the quarter.

Marketing Solutions Segment

• Marketing Solutions segment revenues were $94.6 million in the second quarter.

◦ Same store pro forma Marketing Solutions segment revenues decreased by 24.0% to the prior year driven by

the impacts of the COVID-19 pandemic which began in the latter part of the first quarter of 2020.

• Marketing Solutions segment Adjusted EBITDA was $2.8 million, representing a margin of 2.9% for the quarter.

Integration Update

• Implemented cumulative measures by the end of the second quarter that will result in over $160 million in annualized

savings.

◦ Realized $41.2 million in savings in the second quarter.

• Expect to have implemented measures that will result in over $200 million in annualized savings by the end of the third

quarter.

◦ Expect to realize $50 - $55 million in savings during the third quarter.

• Management remains highly confident in its ability to implement measures by the end of 2021 that are expected to result

in $300 million in synergies.

Earnings Conference Call

Management will host a conference call on Thursday, August 6, 2020 at 8:30 A.M. Eastern Time. A copy of the earnings release

will be posted to the Investor Relations section of Gannett’s website, investors.gannett.com. All interested parties are welcome

to participate on the live call. The conference call may be accessed by dialing 1-855-319-1124 (from within the U.S.) or 1-703-

563-6359 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Gannett Second Quarter

Earnings Call” or access code “4339957”. A simultaneous webcast of the conference call will be available to the public on a

listen-only basis at investors.gannett.com. Please allow extra time prior to the call to visit the website and download any necessary

software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available approximately

two hours following the call’s completion through 11:59 P.M. Eastern Time on Thursday, August 13, 2020 by dialing 1-855-859-

2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference access code “4339957”.

About Gannett

Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused media and marketing solutions company committed to the

communities in our network and helping them build relationships with their local businesses. With an unmatched reach at the

national and local level, Gannett touches the lives of millions with our Pulitzer-Prize winning content, consumer experiences

and benefits, and advertiser products and services. Our portfolio includes the USA TODAY, local media organizations in 46

states in the U.S. and Guam, and Newsquest, a wholly owned subsidiary with over 140 local media brands operating in the

United Kingdom. Gannett also owns the digital marketing services companies ReachLocal, Inc., UpCurve, Inc., and

WordStream, Inc. and runs the largest media-owned events business in the U.S., Gannett Ventures, formerly GateHouse Live.

Effective November 20, 2019, following the completion of its merger with Gannett, New Media Investment Group Inc. trades

on the New York Stock Exchange under Gannett Co., Inc. and its ticker symbol has changed to “GCI”. To connect with us, visit

www.gannett.com.

Same Store Pro Forma Revenues

Same store pro forma revenues are based on GAAP revenues for New Media Investment Group Inc. and Legacy Gannett prior to

the Acquisition and GAAP revenues for Gannett for the current period, excluding (1) revenues related to 2019 acquisitions from

the beginning of 2020 through the first year anniversary of the applicable acquisition date, (2) exited operations, (3) currency

impacts, and (4) deferred revenue impacts related to the Acquisition.

Cautionary Statement Regarding Forward-Looking Statements

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities

Litigation Reform Act of 1995, including, but not limited to, statements regarding our ability to execute our operational and

integration plans, such as measures expected to result in over $200 million in annualized savings, the timing of realizing those

savings, including our expectation that $50 - $55 million will be realized in the third quarter, the potential to realize additional

savings in future quarters, our ability to achieve $300 million of synergies through measures expected to be implemented by the

end of 2021, our expected capital expenditures, our expectations, in terms of both amount and timing, with respect to debt

repayment, real estate sales and debt refinancing, future revenue trends and our ability to influence trends, and the amount and

timing of any future dividend. These statements are based on management’s current expectations and beliefs and are subject to a

number of risks and uncertainties. These and other risks and uncertainties could cause actual results to differ materially from

those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance

its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained

in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such

forward-looking statements, see the risks and other factors detailed from time to time in the Company’s Annual Report on Form

10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Furthermore, new risks

and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor

that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking

statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly

any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations

with regard thereto or change in events, conditions or circumstances on which any statement is based.

* * * *

For investor inquiries, contact: For media inquiries, contact:

Ashley Higgins Stephanie Tackach

Investor Relations Director, Public Relations

212-479-3160 212-715-5490

[email protected] [email protected]

# # #

CONSOLIDATED BALANCE SHEETS

Gannett Co., Inc. and Subsidiaries

Unaudited, in thousands (except per share amounts)

Table No. 1

Assets June 30, 2020 December 31,

2019

(Unaudited) Current assets

Cash and cash equivalents $ 158,603 $ 156,042

Accounts receivable, net of allowance for doubtful accounts of $26,560 and $19,923 288,509 438,523

Inventories 40,468 55,090

Prepaid expenses and other current assets 125,208 129,460

Total current assets 612,788 779,115

Property, plant and equipment, at cost net of accumulated depreciation of $358,746 and $277,291 718,590 815,807

Operating lease assets 296,128 309,112

Goodwill 559,623 914,331

Intangible assets, net 920,525 1,012,564

Deferred income tax assets 105,051 76,297

Other assets 125,212 112,876

Total assets $ 3,337,917 $ 4,020,102

Liabilities and equity

Current liabilities

Accounts payable and accrued liabilities $ 327,071 $ 453,628

Deferred revenue 213,988 218,823

Current portion of long-term debt — 3,300

Other current liabilities 47,017 42,702

Total current liabilities 588,076 718,453

Long-term debt 1,633,449 1,636,335

Convertible debt 3,300 3,300

Deferred tax liabilities 6,256 9,052

Pension and other postretirement benefit obligations 214,084 235,906

Long-term operating lease liabilities 282,896 297,662

Other long-term liabilities 157,313 136,188

Total noncurrent liabilities 2,297,298 2,318,443

Total liabilities 2,885,374 3,036,896

Redeemable noncontrolling interests 458 1,850

Commitments and contingent liabilities

Equity

Common stock of $0.01 par value per share, 2,000,000,000 shares authorized, 136,885,320 issued and

136,114,347 shares outstanding at June 30, 2020; 129,386,258 issued and 128,991,544 shares

outstanding at December 31, 2019 1,369

1,294

Treasury stock at cost, 770,973 and 394,714 shares at June 30, 2020 and December 31, 2019,

respectively (4,818 ) (2,876 )

Additional paid-in capital 1,101,899 1,090,694

Accumulated deficit (633,003 ) (115,958 )

Accumulated other comprehensive income (loss) (13,362 ) 8,202

Total equity 452,085 981,356

Total liabilities and equity $ 3,337,917 $ 4,020,102

CONSOLIDATED STATEMENTS OF OPERATIONS


Unaudited, in thousands (except per share amounts)

Table No. 2 Three months ended

Fiscal year ended June 30, 2020 June 30, 2019

Operating revenues:

Advertising and marketing services $ 356,918 $ 204,697

Circulation 342,646 150,850

Other 67,436 48,840

Total operating revenues 767,000 404,387

Operating expenses:

Operating costs 476,735 233,407

Selling, general and administrative expenses 226,484 126,628

Depreciation and amortization 66,327 23,328

Integration and reorganization costs 32,306 4,278

Acquisition costs 2,379 2,364

Impairment of property, plant and equipment 6,859 1,262

Goodwill and intangible impairment 393,446 —

Loss on sale or disposal of assets 88 947

Total operating expenses 1,204,624 392,214

Operating income (loss) (437,624 ) 12,173

Non-operating (income) expense:

Interest expense 57,928 10,212

Loss on early extinguishment of debt 369 —

Non-operating pension income (17,553 ) (208 )

Other income (6,261 ) (103 )

Non-operating expense 34,483 9,901

Net income (loss) before income taxes (472,107 ) 2,272

Benefit for income taxes (34,276 ) (343 )

Net income (loss) $ (437,831 ) $ 2,615

Net loss attributable to redeemable noncontrolling interests (938 ) (200 )

Net income (loss) attributable to Gannett $ (436,893 ) $ 2,815

Income (loss) per share attributable to Gannett - basic $ (3.32 ) $ 0.05

Income (loss) per share attributable to Gannett - diluted $ (3.32 ) $ 0.05

Dividends declared per share $ — $ 0.38

CONSOLIDATED STATEMENTS OF CASH FLOWS


Unaudited, in thousands

Table No. 3 Six months ended

June 30, 2020 June 30, 2019

Cash flows from operating activities:

Net loss $ (518,437 ) $ (6,740 )

Adjustments to reconcile net loss to operating cash flows:

Depreciation and amortization 144,352 44,251

Equity-based compensation expense 18,968 1,843

Non-cash interest expense 11,902 689

Loss on sale or disposal of assets 745 2,737

Loss on early extinguishment of debt 1,174 —

Goodwill and intangible impairment 393,446 —

Impairment of property, plant and equipment 6,859 2,469

Pension and other postretirement benefit obligations, net of contributions (49,064 ) (649 )

Change in other assets and liabilities, net 14,695 13,053

Net cash provided by operating activities 24,640 57,653

Cash flows from investing activities:

Acquisitions, net of cash acquired — (39,353 )

Purchase of property, plant, and equipment (22,157 ) (4,934 )

Proceeds from sale of real estate and other assets 17,792 7,107

Insurance proceeds received for damage to property 1,643 —

Change in other investing activities (304 ) —

Net cash used for investing activities (3,026 ) (37,180 )

Cash flows from financing activities:

Repayment under term loans (18,985 ) (11,296 )

Borrowing under revolving credit facility — 102,900

Repayments under revolving credit facility — (94,900 )

Payments for employee taxes withheld from stock awards (1,942 ) (700 )

Issuance of common stock 1,007 —

Payment of dividends — (46,066 )

Changes in other financing activities (411 ) —

Net cash used for financing activities (20,331 ) (50,062 )

Effect of currency exchange rate change on cash (780 ) 3

Increase (decrease) in cash, cash equivalents, and restricted cash 503 (29,586 )

Balance of cash, cash equivalents, and restricted cash at beginning of period 188,664 52,770

Balance of cash, cash equivalents, and restricted cash at end of period $ 189,167 $ 23,184

SEGMENT INFORMATION




June 30, 2020 June 30, 2019

Operating revenues:

Publishing $ 695,893 $ 394,435

Marketing Solutions 94,563 27,345

Corporate and Other 2,398 895

Intersegment eliminations (25,854 ) (18,288 )

Total $ 767,000 $ 404,387

Adjusted EBITDA:

Publishing $ 91,991 $ 55,493

Marketing Solutions 2,784 (2,459 )

Corporate and Other (16,757 ) (5,739 )

Total $ 78,018 $ 47,295

Depreciation and amortization:

Publishing $ 56,553 $ 21,769

Marketing Solutions 4,004 778

Corporate and Other 5,770 781

Total $ 66,327 $ 23,328

PRO FORMA SAME STORE REVENUES




June 30, 2020 June 30, 2019 % Change

Pro forma total revenue $ 767,000 $ 1,064,725 (28.0 )%

Acquired revenues (3,797 ) — ***

Currency impact 1,867 — ***

Exited operations (2 ) (957 ) (99.8 )%

Deferred revenue adjustment 980 — ***

Same store total revenue $ 766,048 $ 1,063,768 (28.0 )%

Pro forma advertising and marketing services revenue $ 356,919 $ 573,026 (37.7 )%

Acquired revenues (286 ) — ***

Currency impact 1,167 — ***

Exited operations (2 ) (653 ) (99.7 )%


Same store advertising and marketing services revenue $ 358,194 $ 572,373 (37.4 )%

Pro forma circulation revenue $ 342,645 $ 397,942 (13.9 )%

Acquired revenues — — ***

Currency impact 543 — ***

Exited operations — (146 ) (100.0 )%


Same store circulation revenue $ 343,772 $ 397,796 (13.6 )%

Pro forma other revenue $ 67,436 $ 93,757 (28.1 )%

Acquired revenues (3,511 ) — ***

Currency impact 157 — ***

Exited operations — (158 ) (100.0 )%

Same store other revenue $ 64,082 $ 93,599 (31.5 )%

*** Indicates an absolute value percentage change greater than 100

USE OF NON-GAAP INFORMATION

The Company uses non-GAAP financial performance and liquidity measures to supplement the financial information

presented on a GAAP basis. These non-GAAP financial measures, which may not be comparable to similarly titled measures

reported by other companies, should not be considered in isolation from or as a substitute for the related GAAP measures and

should be read together with financial information presented on a GAAP basis.

The Company defines its non-GAAP measures as follows:

• Adjusted EBITDA is a non-GAAP financial performance measure the Company believes offers a useful view of the

overall operation of our business. The Company defines Adjusted EBITDA as net income (loss) attributable to Gannett

before (1) income tax expense (benefit), (2) interest expense, (3) gains or losses on early extinguishment of debt, (4)

non-operating items, primarily pension costs, (5) depreciation and amortization, (6) integration and reorganization

costs, (7) impairment of long-lived assets, (8) goodwill and intangible impairments, (9) net loss (gain) on sale or

disposal of assets, (10) equity-based compensation, (11) acquisition costs, and (12) certain other non-recurring

charges. The most directly comparable GAAP financial measure is net income (loss) attributable to Gannett.

• Free cash flow is a non-GAAP liquidity measure that adjusts our reported GAAP results for items we believe are

critical to the ongoing success of our business. The Company defines Free cash flow as net cash provided by operating

activities as reported on the statement of cash flows less capital expenditures, which results in a figure representing

Free cash flow available for use in operations, additional investments, debt obligations, and returns to shareholders.

The most directly comparable GAAP financial measure is net cash from operating activities.

Management’s Use of Non-GAAP Measures

Adjusted EBITDA and Free cash flow are not measurements of financial performance under GAAP and should not be

considered in isolation or as an alternative to income from operations, net income (loss), cash flow from continuing operating

activities, or any other measure of performance or liquidity derived in accordance with GAAP. We believe our non-GAAP

measures as we have defined them are helpful in identifying trends in our day-to-day performance because the items excluded

have little or no significance on our day-to-day operations. These measures provide an assessment of controllable expenses and

afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as

achieve optimal financial performance.

Adjusted EBITDA provides us with a measure of financial performance, independent of items that are beyond the control

of management in the short-term such as depreciation and amortization, taxation, non-cash impairments, and interest expense

associated with our capital structure. This metric measures our financial performance based on operational factors that

management can impact in the short-term, namely the cost structure or expenses of the organization. Adjusted EBITDA is one

of the metrics we use to review the financial performance of our business on a monthly basis.

We use Adjusted EBITDA as a measure of our day-to-day operating performance, which is evidenced by the publishing

and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business

operating results. We consider the unrealized (gain) loss on derivative instruments and the (gain) loss on early extinguishment

of debt to be financing related costs associated with interest expense or amortization of financing fees. Accordingly, we exclude

financing related costs such as the early extinguishment of debt because they represent the write-off of deferred financing costs,

and we believe these non-cash write-offs are similar to interest expense and amortization of financing fees, which by definition

are excluded from Adjusted EBITDA. Additionally, the non-cash gains (losses) on derivative contracts, which are related to

interest rate swap agreements to manage interest rate risk, are financing costs associated with interest expense. Such charges are

incidental to, but not reflective of, our day-to-day operating performance, and it is appropriate to exclude charges related to

financing activities such as the early extinguishment of debt and the unrealized (gain) loss on derivative instruments which,

depending on the nature of the financing arrangement, would have otherwise been amortized over the period of the related

agreement and does not require a current cash settlement. Such charges are incidental to, but not reflective of our day-to-day

operating performance of the business that management can impact in the short term.

Limitations of Non-GAAP Measures

Each of our non-GAAP measures has limitations as an analytical tool. They should not be viewed in isolation or as a

substitute for GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to

calculate Adjusted EBITDA and using this non-GAAP financial measure as compared to GAAP net income (loss) include: the

cash portion of interest / financing expense, income tax (benefit) provision, and charges related to impairment of long-lived

assets, which may significantly affect our financial results.

A reader of our financial statements may find this item important in evaluating our performance, results of operations, and

financial position. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete

understanding of the factors and trends affecting our business.

Adjusted EBITDA and Free cash flow are not alternatives to net income, income from operations, or cash flows provided

by or used in operations as calculated and presented in accordance with GAAP. Readers of our financial statements should not

rely on Adjusted EBITDA or Free cash flow as a substitute for any such GAAP financial measure. We strongly urge readers of

our financial statements to review the reconciliation of income (loss) from continuing operations to Adjusted EBITDA and the

reconciliation of net cash from operating activities to Free cash flow, along with our consolidated financial statements included

elsewhere in this report. We also strongly urge readers of our financial statements to not rely on any single financial measure to

evaluate our business. In addition, because Adjusted EBITDA and Free cash flow are not measures of financial performance

under GAAP and are susceptible to varying calculations, the Adjusted EBITDA and Free cash flow measures as presented in

this report may differ from and may not be comparable to similarly titled measures used by other companies.

NON-GAAP FINANCIAL INFORMATION

ADJUSTED EBITDA



Table No. 6

Three months ended June 30, 2020

Publishing Marketing

Solutions Corporate and

Other Consolidated

Total

Net income (loss) attributable to Gannett $ (328,207 ) $ (43,226 ) $ (65,460 ) $ (436,893 )

Benefit for income taxes — — (34,276 ) (34,276 )

Interest expense 92 — 57,836 57,928

Loss on early extinguishment of debt — — 369 369

Non-operating pension income (17,480 ) — (73 ) (17,553 )

Other non-operating items, net (3,066 ) (2,614 ) (581 ) (6,261 )

Depreciation and amortization 56,553 4,004 5,770 66,327

Integration and reorganization costs 20,619 2,962 8,725 32,306

Acquisition costs — — 2,379 2,379

Impairment of long-lived assets 6,859 — — 6,859

Goodwill and mastheads impairment 352,947 40,499 — 393,446

Net (gain) loss on sale or disposal of assets (449 ) 516 21 88

Equity-based compensation — — 7,391 7,391

Other items 4,123 643 1,142 5,908

Adjusted EBITDA (non-GAAP basis) $ 91,991 $ 2,784 $ (16,757 ) $ 78,018

Three months ended June 30, 2019

Publishing Marketing

Solutions Corporate and

Other Consolidated

Total

Net income (loss) attributable to Gannett $ 24,830 $ (3,807 ) $ (18,208 ) $ 2,815

Income tax expense (benefit) — — (343 ) (343 )

Interest expense 23 — 10,189 10,212

Non-operating pension income (208 ) — — (208 )

Other non-operating items, net (162 ) — 59 (103 )

Depreciation and amortization 21,769 778 781 23,328

Integration and reorganization costs 4,074 180 24 4,278

Acquisition costs — — 2,364 2,364

Impairment of long-lived assets 2,469 — (1,207 ) 1,262

Net (gain) loss on sale or disposal of assets 2,159 1 (1,213 ) 947

Equity-based compensation — — 707 707

Other items 539 389 1,108 2,036

Adjusted EBITDA (non-GAAP basis) $ 55,493 $ (2,459 ) $ (5,739 ) $ 47,295

NON-GAAP FINANCIAL INFORMATION

FREE CASH FLOW



Table No. 7

Three months

ended June 30,

2020

Net cash flow used for operating activities (GAAP basis) $ (35,849 )

Capital expenditures (8,374 )

Free cash flow (non-GAAP basis)(1) $ (44,223 ) (1) Free cash flow for the second quarter was negatively impacted by $23.7 million of integration and reorganization costs and $0.1 million of acquisition costs.

gannett announces second quarter 2020 results · 2020. 8. 6. · gannett announces second quarter...

Documents